Every taxable person under UAE corporate tax must keep accounting records and supporting documents for seven years after the end of the relevant tax period, prepare accounts under IFRS, and, in defined cases, submit audited financial statements. Audited accounts are mandatory for any taxable person with revenue above AED 50 million in the tax period and for every Qualifying Free Zone Person regardless of revenue. For tax periods starting on or after 1 January 2025, all tax groups must also prepare audited special purpose financial statements. Businesses below AED 3 million in revenue may use the cash basis of accounting; everyone else uses the accrual basis.
These obligations sit at the center of corporate tax compliance in the UAE. They apply from your first tax period, not from the day the Federal Tax Authority (FTA) asks to see your books. This guide explains what records to keep and for how long, who needs an audit, which accounting standard and basis apply by revenue band, how bookkeeping connects to Small Business Relief and free zone status, and the penalties for poor records. It is written for mainland companies, free zone entities, freelancers, and investors who need to know exactly what the law requires. The rules come from Federal Decree-Law No. 47 of 2022 and its ministerial decisions.
Do you need audited financial statements for UAE corporate tax?
Not every business needs an audit, but two categories always do. You must prepare and maintain audited financial statements if your revenue exceeds AED 50 million in the tax period, or if you are a Qualifying Free Zone Person (QFZP) claiming the 0% rate on qualifying income, no matter how small your revenue is.
The audit rule originally came from Ministerial Decision No. 82 of 2023, which applies to tax periods that began before 1 January 2025. For tax periods commencing on or after 1 January 2025, Ministerial Decision No. 84 of 2025 replaces it and adds a significant new category: every tax group must now prepare audited special purpose financial statements, regardless of the group’s revenue. If you are unsure whether your first accounts fall under the old or new decision, check the start date of your tax period, not the calendar year in which you file.
| Revenue / status in the tax period | Accounting standard | Accounting basis allowed | Audited financial statements? |
|---|---|---|---|
| Up to AED 3 million | IFRS or IFRS for SMEs | Cash basis or accrual basis | No (unless a QFZP or, from 2025, a tax group member) |
| Above AED 3 million, up to AED 50 million | IFRS or IFRS for SMEs | Accrual basis (cash basis only on FTA approval) | No (unless a QFZP or, from 2025, a tax group member) |
| Above AED 50 million | IFRS (full standards) | Accrual basis | Yes, mandatory |
| Qualifying Free Zone Person (any revenue) | IFRS (IFRS for SMEs if revenue up to AED 50m) | Accrual basis (cash basis only up to AED 3m or on approval) | Yes, mandatory |
| Tax group (periods from 1 Jan 2025) | IFRS | Accrual basis | Yes, audited special purpose statements |
If you are a free zone company weighing whether the audit cost is worth keeping the 0% rate, read our guide to how qualifying income works for free zone companies before you decide. Losing QFZP status means the standard 9% rate applies to your taxable income above the threshold.
How long must you keep corporate tax records?
Records and supporting documents must be kept for seven years from the end of the tax period to which they relate. This is set by Article 56 of Federal Decree-Law No. 47 of 2022 and applies whether or not your business ends up paying tax. Exempt persons must also retain records that allow the FTA to confirm their exempt status.
The seven-year clock starts at the end of the tax period, not the date each invoice was issued. So a purchase invoice from early in a financial year that ends 31 December 2024 must be retained until at least the end of 2031. Because the FTA can open a tax audit within this window and request the underlying documents, deleting or losing records before the seven years pass leaves you unable to defend your filed return. Keep both the financial statements and the source documents behind every figure.
Which accounting standard applies to UAE corporate tax?
The applicable accounting standard is IFRS. Under Ministerial Decision No. 114 of 2023, a taxable person whose revenue does not exceed AED 50 million in the tax period may instead apply IFRS for SMEs, a lighter version of the standard. Businesses above AED 50 million must use full IFRS.
This matters because your taxable income starts from accounting net profit shown in IFRS-compliant financial statements, then adjusts for specific corporate tax rules. If your bookkeeping is not on a recognized standard, the starting figure is unreliable and every downstream adjustment is exposed. Small businesses and freelancers moving into corporate tax often run informal spreadsheets; moving to IFRS for SMEs early avoids reconstructing years of accounts later. The choice of standard also feeds the audit question, since audited statements must be prepared against a recognized framework.
Cash basis or accrual basis: which can you use?
Most businesses use the accrual basis, recording income when it is earned and expenses when they are incurred. The cash basis, which records income and expenses only when money moves, is permitted where revenue from business activities does not exceed AED 3 million in the tax period, or on application to the FTA in exceptional circumstances.
Decision point: below AED 3 million, you may choose cash basis, which is simpler and often better matched to how a small service business actually receives money. But the accrual basis gives a truer picture of profit when you invoice in one period and get paid in the next, and it is required once you cross AED 3 million. If you expect to grow past the threshold soon, or you carry receivables and payables across period-ends, starting on the accrual basis avoids a disruptive switch later. A business above AED 3 million that still wants the cash basis must apply to the FTA and show exceptional circumstances; approval is not automatic.
What records must you keep?
You must keep all records and documents that support the information in your corporate tax return and that let the FTA verify your taxable income. That means the financial statements themselves plus the underlying source documents behind every number, retained for the full seven years.
| Record category | Examples to retain |
|---|---|
| Financial statements | Balance sheet, profit and loss, general ledger, trial balance, audited statements where required |
| Sales and income | Sales invoices, receipts, credit notes, service contracts, revenue reconciliations |
| Purchases and expenses | Supplier invoices, expense receipts, payroll records, lease agreements, depreciation schedules |
| Banking and payments | Bank statements, payment confirmations, loan agreements, interest schedules |
| Tax adjustments | Working papers for exempt income, disallowed expenses, tax loss carryforwards, elections made |
| Related-party dealings | Transfer pricing documentation, intercompany agreements, arm’s length analyses |
| Corporate and legal | Trade license, corporate tax registration confirmation, shareholding records, board resolutions |
Set up this document trail when you complete your corporate tax registration on EmaraTax, not at filing time. A clean chart of accounts from day one is far cheaper than reconstructing a year of transactions before a deadline.
How bookkeeping links to reliefs and free zone status
Good records are the condition for most of the tax benefits available in the UAE. Small Business Relief under Ministerial Decision No. 73 of 2023 lets resident persons with revenue up to AED 3 million in the current and all previous tax periods be treated as having no taxable income, for tax periods running through 31 December 2026. But you still have to register, still have to file a return, and still have to keep records that prove your revenue stayed under the threshold. The relief reduces the tax, not the bookkeeping.
Free zone companies face the strictest version of the rule. A Qualifying Free Zone Person must maintain audited financial statements and comply with transfer pricing documentation to keep the 0% rate on qualifying income. Weak records can cost the QFZP status entirely. Businesses setting up in a free zone such as DMCC should budget for an annual audit from the start. Any business with transactions between related parties or connected persons must also hold transfer pricing records showing those dealings were at arm’s length, and the FTA can request that documentation.
How corporate tax records overlap with VAT
If your business is VAT registered, you already keep many of the records corporate tax requires, but the two regimes are separate and have different retention rules. VAT records are generally kept for five years under the VAT law, while corporate tax records must be kept for seven. Aligning both to the longer seven-year corporate tax standard is the safe approach, so you never discard a document one regime still needs. Businesses assessing their obligations can review the VAT registration threshold and process alongside corporate tax, since a growing company often crosses both thresholds within the same period.
Penalties for poor or missing records
Failure to keep the required records carries an administrative penalty of AED 10,000, rising to AED 20,000 if the same violation is repeated within 24 months. These amounts are set by Cabinet Decision No. 75 of 2023 on administrative penalties.
The record-keeping fine is only the direct cost. Without reliable books, you cannot substantiate the figures on your return, which exposes you to further penalties for incorrect filing and to reassessment of your tax during an audit. Late or incorrect returns carry their own charges, covered in our guide to corporate tax filing deadlines and penalties. In practice, poor bookkeeping rarely produces one clean fine; it produces a chain of them, plus the professional fees to fix the accounts under time pressure.
What actually happens in an FTA review
The FTA can open a tax audit and request your records, and the burden is on you to produce them. In an audit, the FTA typically asks for the financial statements, the general ledger, and a sample of source documents behind specific line items, then traces the numbers from your return back to the underlying invoices and bank entries. Discrepancies between what you filed on EmaraTax and what your ledger shows are the most common trigger for a reassessment. This is why the audit trail, from source document to ledger to return, has to be intact for the full seven years. Businesses that keep organized digital records typically clear a review quickly; those reconstructing paperwork after the request are the ones that face extended queries and penalties. If you are unsure of any deadline for producing records, confirm the current timeline directly with the FTA.
FAQ
Do I need audited financial statements for UAE corporate tax?
You need audited financial statements if your revenue exceeds AED 50 million in the tax period or if you are a Qualifying Free Zone Person, regardless of revenue. For tax periods starting on or after 1 January 2025, all tax groups must also prepare audited special purpose financial statements. Other businesses are not required to audit but must still keep IFRS-compliant accounts.
How long must I keep corporate tax records?
Records and supporting documents must be kept for seven years from the end of the relevant tax period, under Article 56 of Federal Decree-Law No. 47 of 2022. This applies even if no tax is due, and exempt persons must keep records confirming their exempt status.
What accounting standard applies to UAE corporate tax?
IFRS is the applicable standard. Businesses with revenue up to AED 50 million in the tax period may use the lighter IFRS for SMEs instead, under Ministerial Decision No. 114 of 2023. Companies above AED 50 million must use full IFRS.
Can I use the cash basis of accounting?
Yes, if your revenue from business activities does not exceed AED 3 million in the tax period. Above that, you must use the accrual basis unless you apply to the FTA and it approves the cash basis in exceptional circumstances. Most businesses use the accrual basis.
Do free zone companies need an audit?
Every Qualifying Free Zone Person must prepare and maintain audited financial statements to keep the 0% corporate tax rate on qualifying income, no matter how small its revenue. A free zone company that does not maintain audited accounts risks losing QFZP status and being taxed at the standard rate.
What is the AED 50 million threshold?
Revenue above AED 50 million in a tax period triggers two things: the business must use full IFRS rather than IFRS for SMEs, and it must prepare audited financial statements. Revenue means gross income derived in the tax period, before deductions.
What records must I keep for corporate tax?
Keep financial statements plus all supporting documents: sales and purchase invoices, receipts, contracts, bank statements, payroll, depreciation schedules, transfer pricing documentation, and working papers for any tax adjustments or elections. These must let the FTA verify the taxable income on your return.
What is the penalty for not keeping records?
The administrative penalty for failing to keep the required records is AED 10,000, increasing to AED 20,000 if the violation is repeated within 24 months, under Cabinet Decision No. 75 of 2023. Poor records also expose you to further penalties for incorrect returns.
Does Small Business Relief still require bookkeeping?
Yes. Small Business Relief removes the tax, not the compliance. A business claiming the relief must still register for corporate tax, file a return, and keep records proving its revenue stayed at or below AED 3 million in the current and all previous tax periods.
Official Sources
- Federal Tax Authority – Federal Decree-Law No. 47 of 2022 and corporate tax legislation
- Ministry of Finance – Audited financial statements (Ministerial Decision No. 82 of 2023 and amendments)
- Ministry of Finance – Ministerial Decision No. 84 of 2025 on Audited Financial Statements
- Ministry of Finance – Ministerial Decision No. 114 of 2023 on Accounting Standards and Methods
- Ministry of Finance – Small Business Relief (Ministerial Decision No. 73 of 2023)
- Cabinet Decision No. 75 of 2023 on Administrative Penalties for Corporate Tax
- Federal Tax Authority – Legislation index
Information current as of July 2026. Corporate tax rules, thresholds, and penalty amounts are subject to change and can vary by tax period, free zone, and entity type. Verify your specific obligations with the Federal Tax Authority or a licensed tax adviser before acting.
